<PAGE>



                                                                  CONFORMED COPY


                       SECURITIES AND EXCHANGE COMMISSION
                              Washington, DC 20549

                              --------------------

                                   FORM 10-Q/A

             QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
                         SECURITIES EXCHANGE ACT OF 1934

                  For the quarterly period ended March 31, 2001
                         Commission File Number 0-23611


                                DSET CORPORATION
             ------------------------------------------------------
             (Exact Name of Registrant as Specified in Its Charter)

<TABLE>
<S>                                        <C>
           New Jersey                                 22-3000022
-------------------------------------  -----------------------------------------
(State or Other Jurisdiction of            (I.R.S. Employer Identification No.)
 Incorporation or Organization)

1160 U. S. Highway 22, Bridgewater, New Jersey                         08807
--------------------------------------------------------------------------------
(Address of Principal Executive Offices)                             (Zip Code)
</TABLE>

                                 (908) 526-7500
                         -------------------------------
                         (Registrant's Telephone Number,
                              Including Area Code)

        Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.


               Yes:     X                           No:
                    -----------                         ----------

        Indicate the number of shares outstanding of each of the registrant's
classes of common stock, as of May 1, 2001:

<TABLE>
<CAPTION>

                    Class               Number of Shares
                    -----               ----------------
<S>                                        <C>
         Common Stock, no par value        11,631,990

</TABLE>







<PAGE>



                                DSET CORPORATION

                                TABLE OF CONTENTS


<TABLE>
<CAPTION>

                                                                                                         Page
                                                                                                         ----

<S>                                                                                                    <C>
PART I. FINANCIAL INFORMATION..........................................................................    1

        Item 1. Condensed Financial Statements..........................................................   1

                Condensed Consolidated Balance Sheets as of March 31, 2001 and
                   December 31, 2000....................................................................   2

                 Condensed  Consolidated  Statements of Income (Loss) and
                   Comprehensive Income (Loss) for the Three Months Ended
                   March 31, 2001 and 2000..............................................................   3

                 Condensed Consolidated Statements of Cash Flows for the Three Months Ended March
                   31, 2001 and 2000....................................................................   4

                 Notes to Condensed Consolidated Financial Statements...................................   5

        Item 2.  Management's Discussion and Analysis of Financial Condition and Results of
                   Operations...........................................................................  14

                 Results of Operations..................................................................  18

                 Liquidity and Capital Resources........................................................  20

        Item 3.  Quantitative and Qualitative Disclosures About Market Risk.............................  22

PART II. OTHER INFORMATION..............................................................................  23

        Item 2.  Use of Proceeds........................................................................  23

        Item 5.  Other Information......................................................................  24

        Item 6.  Exhibits and Reports on Form 8-K.......................................................  24

SIGNATURES .............................................................................................  25
</TABLE>


                                        i






<PAGE>







                          PART I. FINANCIAL INFORMATION


                          Item 1. Financial Statements








                                        1









<PAGE>


DSET Corporation and Subsidiaries
Condensed Consolidated Balance Sheets
--------------------------------------------------------------------------------

<TABLE>
<CAPTION>

                                                                                March 31, 2001   December 31, 2000
                                                                                --------------   -----------------
                                                                                 (unaudited)         (unaudited)

<S>                                                                          <C>                   <C>
Assets
Current assets:
   Cash and cash equivalents                                                     $  6,384,234          $ 7,314,254
   Marketable securities                                                           19,733,617           27,760,494
   Accounts receivable, net of allowance for doubtful accounts
     of $12,725,763 and $12,285,676                                                 4,894,200            6,248,635
   Income taxes receivable                                                          3,438,397            3,561,201
   Prepaid licenses                                                                   854,071              766,071
   Prepaid expenses and other current assets                                        1,081,117            1,768,709
                                                                                 ------------          -----------
       Total current assets                                                        36,385,636           47,419,364

Acquired technology, net                                                            4,423,597            4,380,141
Software licenses, net                                                                     --            2,257,101
Software development costs, net                                                       403,469              435,746
Fixed assets, net                                                                   4,762,336            4,999,684
Goodwill, net                                                                         862,800              928,141
Other assets, net                                                                     920,501              762,381
                                                                                 ------------          -----------
       Total assets                                                              $ 47,758,339          $61,182,558
                                                                                 ============          ===========

Liabilities and Shareholders' Equity
Current liabilities:
   Accounts payable and accrued expenses                                         $  5,960,858          $ 8,028,046
   Deferred revenues                                                                3,064,170            3,088,086
   Current portion of notes payable                                                   837,004              872,129
   Current portion of capital lease obligation                                        138,367              138,367
                                                                                 ------------          -----------
       Total current liabilities                                                   10,000,399           12,126,628

Long-term notes payable                                                                    --              409,901
Deferred  rent                                                                        520,486              505,264
Capital lease obligation                                                              389,135              423,304
                                                                                 ------------          -----------
       Total liabilities                                                           10,910,020           13,465,097
                                                                                 ------------          -----------

Commitments and contingencies

Shareholders' equity:
   Common stock, no par value; 40,000,000 shares authorized, 11,631,990 and
     11,630,115 shares issued and outstanding at March 31, 2001 and December
     31, 2000, respectively                                                        50,146,240           50,169,404
   Deferred stock compensation                                                        (40,897)             (59,371)
   Accumulated deficit                                                            (13,487,616)          (2,564,554)
   Accumulated other comprehensive income                                             230,592              171,982
                                                                                 ------------          -----------
       Total shareholders' equity                                                  36,848,319           47,717,461
                                                                                 ------------          -----------
       Total liabilities and shareholders' equity                                $ 47,758,339          $61,182,558
                                                                                 ============          ===========

</TABLE>


  The accompanying notes are an integral part of these condensed consolidated
                             financial statements.

                                       2






<PAGE>



DSET Corporation and Subsidiaries
Condensed Consolidated Statements of Income (Loss) and Comprehensive Income
(Loss)

<TABLE>
<CAPTION>

                                                          Three Months Ended March 31,
                                                          ----------------------------
                                                            2001              2000*
                                                            ----              ----
                                                         (unaudited)       (unaudited)

<S>                                                      <C>              <C>
Revenues:
   License revenues                                      $  1,521,160     $  8,095,419
   Service revenues                                         1,894,280        3,502,994
                                                         ------------     ------------

              Total revenues                                3,415,440       11,598,413
                                                         ------------     ------------

Cost of revenues:
   License revenues                                           501,826          799,219
   Service revenues                                         1,990,663        2,235,645
                                                         ------------     ------------

         Total cost of revenues                             2,492,489        3,034,864
                                                         ------------     ------------

         Gross profit                                         922,951        8,563,549
                                                         ------------     ------------

Operating expenses:
   Sales and marketing                                      2,529,592        2,611,003
   Research and product development                         3,909,534        3,418,351
   General and administrative                               1,852,265        1,294,500
   Bad debt expense                                           440,087           99,000
   Amortization of goodwill and other intangibles             100,117          103,284
   Restructuring and other charges                          3,428,918               --
                                                         ------------     ------------

         Total operating expenses                          12,260,513        7,526,138
                                                         ------------     ------------

         Operating (loss) income                          (11,337,562)       1,037,411

Interest expense and other income (expense)                   (46,928)         (55,299)
Interest income                                               490,265          398,434
                                                         ------------     ------------

(Loss) income before income taxes                         (10,894,225)       1,380,546

Provision  for income taxes                                    28,837          459,846
                                                         ------------     ------------

Net (loss) income                                        $(10,923,062)    $    920,700
                                                         ============     ============

Other comprehensive income (loss), net of tax
     Unrealized appreciation on investments                    56,941           97,507
     Cumulative translation adjustment                          1,669             (720)
                                                         ------------     ------------
         Comprehensive (loss) income                     $(10,864,452)    $  1,017,487
                                                         ============     ============
Net (loss) income applicable to common shares            $(10,923,062)    $    920,700
                                                         ============     ============

Net (loss) income per common share                       $      (0.94)    $       0.08
                                                         ============     ============

Weighted average number of common shares
   outstanding                                             11,631,365       11,037,458
                                                         ============     ============

Net (loss) income per common share assuming dilution     $      (0.94)    $       0.08
                                                         ============     ============

Weighted average number of common shares and
   common equivalent shares outstanding                    11,631,365       12,116,680
                                                         ============     ============

</TABLE>

       * Certain amounts have been reclassified for comparative purposes.

  The accompanying notes are an integral part of these condensed consolidated
                             financial statements.


                                       3








<PAGE>


DSET Corporation and Subsidiaries
Condensed Consolidated Statements of Cash Flows
--------------------------------------------------------------------------------


<TABLE>
<CAPTION>
                                                                          Three Months Ended March 31,
                                                                      ---------------------------------
                                                                          2001                 2000*
                                                                          ----                 ----
                                                                       (unaudited)          (unaudited)
<S>                                                                  <C>                  <C>
Cash flows from operating activities:
   Net (loss) income                                                 $(10,923,062)        $    920,700
   Adjustments to reconcile net (loss) income to net cash
    provided by (used in) operating activities:
     Deferred income taxes                                                     --             (133,616)
     Tax benefit from exercise of stock options                                --            1,775,415
     Stock based compensation charges                                      (9,227)              32,905
     Depreciation                                                         352,991              233,181
     Amortization                                                         421,964              207,199
     Loss on disposal of assets                                                --                  475
     Bad debt expense                                                     440,087               99,000
     Restructuring and other charges                                    2,895,825                   --
     Changes in assets and liabilities:
       Accounts receivable, net                                           914,348            5,573,994
       Prepaid licenses                                                   (88,001)            (790,000)
       Prepaid assets and other current assets                            679,992             (186,515)
       Other assets                                                      (192,895)              (9,897)
       Accounts payable and accrued expenses                           (2,148,970)             734,316
       Deferred rent                                                       15,222                   --
       Income taxes payable and receivable                                122,804           (1,739,932)
       Deferred revenues                                                  (23,916)           1,581,672
                                                                     ------------         ------------
         Net cash (used in) provided by operating activities           (7,542,838)           8,298,897
                                                                     ------------         ------------
Cash flows from investing activities:
   Purchases of marketable securities                                          --          (10,427,655)
   Redemption of marketable securities                                  8,083,818            9,978,542
   Purchase of acquired technology                                       (347,035)                  --
   Acquisition of fixed assets                                           (603,603)          (1,038,901)
                                                                     ------------         ------------
         Net cash provided by (used in) investing activities            7,133,180           (1,488,014)
                                                                     ------------         ------------
Cash flows from financing activities:
   Loans to officers and shareholders                                          --             (200,000)
   Repayments of loans from officers and shareholders                       7,600                   --
   Repayments of notes payable                                           (500,000)            (528,530)
   Repayments of capital lease obligation                                 (34,169)             (42,192)
   Proceeds from the exercise of stock options and warrants                 4,538            1,115,693
                                                                     ------------         ------------
         Net cash (used in) provided by financing activities             (522,031)             344,971
                                                                     ------------         ------------
   Effect of foreign exchange rate changes on cash                          1,669                   --
                                                                     ------------         ------------
         Net increase (decrease) in cash and cash equivalents            (930,020)           7,155,854
                                                                     ------------         ------------

   Cash and cash equivalents, beginning of period                       7,314,254            2,212,759
                                                                     ------------         ------------
   Cash and cash equivalents, end of period                          $  6,384,234         $  9,368,613
                                                                     ============         ============

Supplemental disclosure of cash flow information:
   Cash (received) paid during the period for income taxes           $   (123,933)        $    572,350
   Cash paid during the period for interest                          $     36,528         $     18,464

</TABLE>

       * Certain amounts have been reclassified for comparative purposes.


  The accompanying notes are an integral part of these condensed consolidated
                             financial statements.


                                       4





<PAGE>



DSET Corporation and Subsidiaries
March 31, 2001
Notes to Condensed Consolidated Financial Statements (unaudited)


1.    Basis of Presentation

      The condensed consolidated financial information presented as of March 31,
      2001 and for the three-month periods ended March 31, 2001 and 2000 is
      unaudited, but in the opinion of DSET Corporation's ("DSET" or the
      "Company") management, contains all adjustments (consisting only of normal
      recurring adjustments) which the Company considers necessary for the fair
      presentation of the Company's financial position as of March 31, 2001 and
      the results of its operations and cash flows for the three-month periods
      ended March 31, 2001 and 2000. The financial statements included herein
      have been prepared in accordance with generally accepted accounting
      principles and the instructions to Form 10-Q and Rule 10-01 of Regulation
      S-X. Accordingly, certain information and footnote disclosures normally
      included in financial statements prepared in accordance with generally
      accepted accounting principles have been condensed or omitted. These
      financial statements should be read in conjunction with the Company's
      audited financial statements and accompanying notes and Management's
      Discussion and Analysis of Financial Condition and Results of Operations
      contained in the Company's Annual Report on Form 10-K/A for the year ended
      December 31, 2000. The December 31, 2000 balance sheet data contained in
      this Form 10-Q/A was derived from audited financial statements, but does
      not include all disclosures required by generally accepted accounting
      principles.

      Results for the interim period are not necessarily indicative of results
      that may be expected for the entire year.

2.    Summary of Significant Accounting Policies

      Consolidation
      The condensed consolidated financial statements include all wholly-owned
      subsidiaries from the respective dates of their acquisition or formation.
      The consolidated entity includes DSET Corporation and its wholly-owned
      subsidiaries, DSET Acquisition Corp., a Delaware corporation; Konark Inc.
      ("Konark"), a California corporation; PIC Technologies, Inc., a Delaware
      corporation; Chengdu DSET Science & Technology Co., Ltd. (China) (see Note
      7); and DSET Canada, Inc. (Canada). All intercompany transactions have
      been eliminated in consolidation.

      Cash and Cash Equivalents
      The Company considers all highly liquid investments purchased with an
      original maturity of three months or less to be cash equivalents.

      Marketable Securities

                                       5







<PAGE>



DSET Corporation and Subsidiaries
March 31, 2001
Notes to Condensed Consolidated Financial Statements (unaudited)


      The marketable securities held by the Company are considered to be
      available-for-sale securities and are reported at fair value. Unrealized
      appreciation was $237,000 (net of deferred taxes of $133,000) at March 31,
      2001. Cost is determined on a specific identification basis.

      Fixed Assets
      Equipment, furniture and purchased software are stated at cost less
      accumulated depreciation and amortization. Depreciation is calculated
      using a straight-line method over estimated useful lives ranging from
      three to seven years. Leasehold improvements are amortized over the lesser
      of the estimated useful life or the lease term. Gains and losses on the
      disposal of fixed assets are recognized in the Statement of Income (Loss)
      in the period of disposition.

      Goodwill
      The Company amortizes goodwill using a straight-line method over an
      estimated useful life of five years. The Company periodically assesses the
      realizability of the asset based on estimated future cash flows.
      Accumulated amortization was $507,000 as of March 31, 2001 and $442,000 as
      of December 31, 2000.

      Software Development Costs
      Capitalization of software development costs begins on establishment of
      technological feasibility. Costs incurred prior to establishment of
      technological feasibility are charged to research and product development
      expense. The ongoing assessment of recoverability of capitalized costs
      requires considerable judgement by management with respect to certain
      factors, including the anticipated future gross revenues, estimated
      economic life and changes in technology. These factors are considered on a
      product-by-product basis. Amortization of software development costs is
      the greater amount computed using (a) the ratio that current gross
      revenues for a product bears to the total of current and anticipated
      future gross revenues for that product or (b) the straight-line method
      over the remaining estimated economic life ranging from three to five
      years of the product including the period being reported on. Accumulated
      amortization was approximately $242,000 as of March 31, 2001 and $210,000
      as of December 31, 2000.

      Acquired Technology
      Acquired technology represents the costs of feasible technology acquired
      from external sources. At March 31, 2001, acquired technology mainly
      reflects the purchase of certain assets of Network Programs LLC ("NPL")
      and Konark Inc., as well as related costs to acquire such assets.
      Accumulated amortization was $1,380,000 as of March 31, 2001 and
      $1,197,000 as of December 31, 2000. In the quarter ended Marcy 31, 2001,
      the Company purchased acquired technology of approximately $347,000 for
      technology associated with EZ911 Connector. Amortization of acquired
      technology is the greater of the amount

                                       6







<PAGE>



DSET Corporation and Subsidiaries
March 31, 2001
Notes to Condensed Consolidated Financial Statements (unaudited)


      computed using (a) the ratio that current gross revenues for a product
      bears to the total of current and anticipated future gross revenues for
      that product or (b) the straight-line method over the remaining estimated
      economic life ranging from three to five years of the product including
      the period being reported on.

      Research and Product Development
      Research and product development costs are charged to expense as incurred.
      However, the costs incurred for the development of computer software that
      will be sold, leased, or otherwise marketed are capitalized when
      technological feasibility has been established.

      Long-Lived Assets
      The Company reviews its long-lived assets for impairment whenever events
      or changes in circumstances indicate that the carrying amount of an asset
      may not be recoverable. The Company considers historical performance and
      future estimated results in its evaluation of potential impairment and
      then compares the carrying amount of the asset to the estimated future net
      cash flows expected to result from the use of the asset. If the carrying
      amount of the asset exceeds estimated undiscounted future net cash flows,
      the Company measures the amount of the impairment by comparing the
      carrying amount of the asset to its fair value. Fair value is generally
      measured by discounting expected future net cash flows at the rate the
      Company utilizes to evaluate potential investments (see Note 7).

      Revenue Recognition
      License revenues are comprised of one time license fees for application
      development tools, Local Number Portability ("LNP") solutions and
      electronic-bonding gateways and of repetitive license royalty fees for
      application development tools that are sold on a multiple-use basis.
      Revenue for the one time license fees are recognized when there is
      persuasive evidence that an arrangement exists, delivery has occurred, the
      fee is fixed and determinable and collection is probable. Royalty revenue
      for the multiple-use licenses is recognized when the customer sells a
      product within which is embedded libraries of the application development
      tools. The contracts for multiple-use licenses do not call for any minimum
      royalties.

      Service revenues are comprised of postcontract customer support service
      fees, professional service fees including training, consulting,
      installation, implementation, and charges for reimbursable expenses and
      custom product development fees. Revenues for the postcontract customer
      support services are recognized ratably over the period in which the
      services are provided. Revenues for training in the Company's products are
      recognized when the training has been completed. Revenues for consulting
      services are recognized in the period in which the consulting services are
      provided. Revenues for product installation and implementation services
      are recognized when contractually agreed upon milestones have been
      achieved. It is not necessary for the Company to provide implementation
      services.

                                       7







<PAGE>



DSET Corporation and Subsidiaries
March 31, 2001
Notes to Condensed Consolidated Financial Statements (unaudited)


      Outside third-parties are available to perform integration of the
      Company's software with the customer's systems or the customer can choose
      to install the software. Revenues for reimbursable expenses are recognized
      as the expenses are incurred. Revenues for custom product development are
      recognized under the contract method of accounting since they generally
      require significant production, modification or customization of the
      Company's products. Revenue for custom product development is recognized
      as a percentage of the contract completed based upon the ratio of direct
      labor costs incurred to the estimated total direct labor costs required
      for the project. Any revenue for custom product development that is
      recognized in excess of amounts invoiced to the customer for progress
      billings is recorded as unbilled accounts receivable.

      Some customer contracts provide for multiple elements to be delivered (for
      example, electronic-bonding gateway product, postcontract customer
      support, training, custom product development). In those contracts that
      include multiple elements, the contract fee is allocated to the various
      elements based on vendor-specific objective evidence (VSOE) of fair value.
      Vendor-specific objective evidence of fair value is the price charged when
      the same element is sold separately, or for an element not yet being sold
      separately, the price established by the Company's product management
      department.

      In 2000, the Company entered into an agreement with NE Technologies
      pursuant to which NE Technologies performs as a subcontractor for DSET
      with respect to substantially all of the post contract customer support
      for network solutions to which DSET was obligated. In connection with
      such agreement, DSET receives a royalty of between fifteen and thirty
      percent for all new business generated by NE Technologies. Such royalties
      amounted to $54,000 in the first quarter of 2001.

      Income Taxes
      The Company utilizes an asset and liability approach for financial
      reporting for income taxes. Deferred income tax assets and liabilities are
      computed for differences between the financial statement and tax bases of
      assets and liabilities that will result in taxable or deductible amounts
      in the future, based on enacted tax laws and rates applicable to the
      period in which the differences are expected to affect taxable income.
      Valuation allowances are established, when necessary, to reduce the
      deferred tax assets to the amount expected to be realized.

      For certain stock options, the Company receives a tax deduction for the
      difference between the fair market value of the Company's common stock at
      the date of exercise of the stock option and the exercise price. To the
      extent the amount deducted for income taxes exceeds the amount charged to
      operations for financial statement purposes, the related tax benefits are
      credited to shareholders' equity.

                                       8







<PAGE>



DSET Corporation and Subsidiaries
March 31, 2001
Notes to Condensed Consolidated Financial Statements (unaudited)


      Fair Value of Financial Instruments
      The carrying amounts in the financial statements for cash and cash
      equivalents, accounts receivable, accounts payable and accrued expenses,
      and notes payable approximate their market value because of the short
      maturity of those instruments.

      Use of Estimates in the Preparation of Financial Statements
      The preparation of financial statements in conformity with generally
      accepted accounting principles requires management to make estimates and
      assumptions that affect the reported amounts of assets and liabilities and
      disclosure of contingent assets and liabilities at the date of the
      financial statements and the reported amounts of revenues and expenses
      during the reporting period. Actual results could differ from those
      estimates. Estimates are used when accounting for certain items such as
      the allowance for doubtful accounts, depreciation and amortization, future
      revenue streams from its products and income taxes. Additionally, the
      Company evaluates the useful lives of its acquired technology and software
      development costs based upon changes in technology and industry
      conditions.

      Reclassifications
      Certain amounts in 2000 have been reclassified to conform to the current
      period presentation.

      New Accounting Standards
      On June 15, 1998, the Financial Accounting Standards Board ("FASB") issued
      Statement of Financial Accounting Standards No. 133, "Accounting for
      Derivatives and Hedging Activities" ("SFAS No. 133"). SFAS No. 133 is
      effective for all fiscal quarters of all fiscal years beginning after June
      15, 2000 (January 1, 2001 for the Company). SFAS No. 133 requires that all
      derivative instruments be recorded on the balance sheet at their fair
      value. Changes in the fair value of derivatives are recorded each period
      in current earnings or other comprehensive income, depending on whether a
      derivative is designated as part of a hedge transaction and, if it is, the
      type of hedge transaction. To date the Company has not invested in
      derivative instruments and has not engaged in hedging activities.
      Accordingly, the adoption of SFAS 133 did not have an impact on the
      Company's results of operations, cash flows or its financial position. In
      June 2000, the FASB issued Statement of Financial Accounting Standards No.
      138, "Accounting for Certain Derivative Instruments and Certain Hedging
      Activities" ("SFAS 138"). SFAS 138 addresses certain issues related to the
      implementation of SFAS 133, but did not change the basic accounting model
      of SFAS 133.

3.    Debt Obligations

a)    Capital Lease Obligation

                                       9







<PAGE>



DSET Corporation and Subsidiaries
March 31, 2001
Notes to Condensed Consolidated Financial Statements (unaudited)


      In June 1999, the Company entered into a five-year capital lease agreement
      mainly for office furniture and fixtures in the Company's facilities in
      Bridgewater, New Jersey and Plano, Texas at an annual rate of 8.21%.
      Annual lease payments approximate $180,000. Assets recorded under this
      lease are included in fixed assets as follows:

<TABLE>
<CAPTION>
                                               March 31, 2001            December 31, 2000
                                               --------------            -----------------
      <S>                                    <C>                       <C>
      Furniture and fixtures                      $ 743,462                 $ 743,462
      Accumulated amortization                     (185,866)                 (159,313)
                                                  ---------                 ---------
                                                  $ 557,596                 $ 584,149
                                                  =========                 =========
</TABLE>

b)    Lines of Credit
      In August 2000, the Company renewed an unsecured revolving credit facility
      with a bank increasing the line of credit to $5 million. Borrowings under
      this line of credit bear interest at the bank's prime rate (7.50% at March
      31, 2001) less 0.25% on amounts outstanding of less than $1 million and at
      the bank's prime rate for aggregate principal amounts exceeding $1
      million. No borrowings under this line were outstanding at March 31, 2001
      or December 31, 2000. This credit facility contains, among other
      provisions, a covenant, which restricts the Company's ability to pay cash
      dividends. At March 31, 2001 and December 31, 2000, the "earnings before
      income taxes, depreciation and amortization" ("EBITDA") covenant was not
      met. The Company has applied for a waiver of this covenant.

c)    Notes Payable
      As part of the acquisition of Konark, the Company paid $1.0 million in
      cash and issued a $2.5 million non-interest bearing note payable which has
      been discounted at 8.25%. Interest expense is accreted monthly and
      totalled $25,000 at March 31, 2001. The note is payable in five
      installments, and matures on March 1, 2002.

      As of March 31, 2001, future payments under the notes are as follows:

                                       10







<PAGE>



DSET Corporation and Subsidiaries
March 31, 2001
Notes to Condensed Consolidated Financial Statements (unaudited)

<TABLE>
<CAPTION>
                                                                           Principal
                    Year Ending December 31,                                Payments
                    ------------------------                               ---------
                    <S>                                                      <C>
                    2001                                                   $  500,000
                    2002                                                      500,000
                                                                           ----------
                                                                            1,000,000

                    Less:  Unamortized interest                              (162,996)
                                                                           ----------

                    Present value of notes payable                            837,004

                    Less:  Current portion                                    837,004
                                                                           ----------

                    Long-term portion                                      $        0
                                                                           ==========
</TABLE>

4.    Revenue Concentration

      The Company had one customer accounting for 37% of revenues for the
      quarter ended March 31, 2001 and one customer, which accounted for 20% of
      revenues for the quarter ended March 31, 2000. The Company had one
      customer accounting for 14% of accounts receivable, net at March 31, 2001
      and one customer accounting for 23% of accounts receivable, net at
      December 31, 2000. The Company derives a portion of its revenues from
      international sales, which constituted approximately 1.3% and 6.0% of the
      Company's total revenues in the first quarter of 2001 and 2000,
      respectively. International sales are derived from Europe (primarily Italy
      and Germany), and Asia (primarily Korea, China and Japan). The Company's
      international sales currently are United States dollar-denominated. As a
      result, an increase in the value of the United States dollar relative to
      foreign currencies could make the Company's products and services less
      competitive in international markets.

5.    Earnings Per Share

      The Company calculates, presents and discloses earnings per share ("EPS")
      in accordance with SFAS No. 128, "Earnings per Share". The statement
      defines two earnings per share calculations, basic and assuming dilution.
      The objective of basic EPS is to measure the performance of an entity over
      the reporting period by dividing net income available to common stock by
      the weighted average shares outstanding. The objective of diluted EPS is
      consistent with that of basic EPS, that is to measure the performance of
      an entity over the reporting period, while giving effect to all dilutive
      potential common shares that were outstanding during the period. The
      calculation of diluted EPS is similar to basic EPS except the denominator
      is increased for the conversion of potential common shares. No potential
      dilutive common shares were outstanding because of the Company's net loss
      for the three

                                       11







<PAGE>



DSET Corporation and Subsidiaries
March 31, 2001
Notes to Condensed Consolidated Financial Statements (unaudited)

      month period ended March 31, 2001. The following table is a reconciliation
      of the numerator and denominator under each method:

<TABLE>
<CAPTION>
                                                       For the Three Months Ended March 31,
                                                       ------------------------------------
                                               2001                                             2000
                               ----------------------------------------       -------------------------------------------

                                  Net                           Per Share         Net                           Per Share
                                 Loss           Shares           Amount          Income         Shares            Amount
                                 ----           ------           ------          ------         ------            ------
<S>                         <C>                 <C>            <C>            <C>              <C>               <C>
Basic EPS:
Net (loss) income
applicable to
common shares                $(10,923,062)     11,631,365        $(0.94)        $920,700      11,037,458          $0.08

Assuming dilution:
      Stock options                     -               -                              -       1,036,207

      Warrants                          -               -                              -          43,015
                             ------------      ----------                       --------      ----------
                             $(10,923,062)     11,631,365        $(0.94)        $920,700      12,116,680          $0.08
                             ============      ==========                       ========      ==========
</TABLE>


     At March 31, 2001 substantially all option exercise prices exceeded the
     market price of the Company's common stock. At March 31, 2001, outstanding
     options to purchase 2,281,852 shares of common stock are antidilutive and
     excluded from the computation of diluted loss per share at March 31, 2001.

6.   Related Party Transactions

     During the year ended 2000, the Company extended three loans to its
     President and Chief Executive Officer totaling $902,728 with a 6% interest
     rate per annum with one due November 2000, one due May 2001 and one due
     October 2001. As of December 31, 2000, the President and Chief Executive
     Officer repaid $527,728 against these loans leaving an outstanding balance
     of $627,728 inclusive of a loan of $252,728, which originated in August
     1999. The Company's President and Chief Executive Officer has pledged
     various personal assets including vested options to purchase the Company's
     stock, shares of the Company's Common Stock, personal real estate assets
     and various securities against these loans. The Company recorded a
     provision of $350,000 for bad debt expense against these loans in the
     fourth quarter of 2000 for the amount of the loans that exceeds the
     estimated realizable value.

                                       12







<PAGE>



DSET Corporation and Subsidiaries
March 31, 2001
Notes to Condensed Consolidated Financial Statements (unaudited)

     In March 2001, the Company and its President and Chief Executive Officer
     entered into a new loan arrangement which consolidated the outstanding
     balance for all previous loans and provided for a four-year payment
     schedule with a balloon payment due at the end of the term.

7.   Restructuring and Other Charges

     In January 2001, the Company sold its subsidiary, Chengdu DSET Science and
     Technology Co., Ltd. In accordance with Statement of Financial Accounting
     Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and
     for Long-Lived Assets to Be Disposed Of", the Company recorded a pre-tax
     charge of $278,500 in the fourth fiscal quarter of 2000 against the
     remaining investment in the subsidiary.

     In March 2001, the Company deemed it necessary to reduce the workforce in
     the United States and to close its Canadian subsidiary due to the changing
     and unpredictable conditions in the marketplace, the discontinuance of
     product lines and in an effort to conserve cash. The Company recorded an
     impairment charge of approximately $2.2 million in the first quarter of
     2001 for the carrying value of the Daleen license in the Canadian market.

     The approximate restructuring charges are summarized as follows:

<TABLE>

          <S>                                                                            <C>
          Daleen software license asset impairment                                        $2,174,000

          DSET USA and DSET Canada Inc. - work force reduction                               378,000

          DSET USA and DSET Canada  Inc. - asset impairments and future lease                847,000
          payments

          Other                                                                               30,000
                                                                                          ----------

          Total First Quarter 2001 Restructuring and other charges                        $3,429,000
                                                                                          ==========
</TABLE>

     The amount paid relating to this restructuring and other charges was
     approximately $533,000 for the quarter ended March 31, 2001.

                                       13





<PAGE>




Item 2. Management's  Discussion and Analysis of Financial Condition and Results
        of Operations.

General

         DSET is a leading provider of software solutions and services
principally for the North American telecommunications marketplace. The DSET
suite of electronic-bonding gateways interconnects the operations support
systems ("OSSs") of competing telecommunications service providers ("CSPs"),
with the OSSs of incumbent local exchange carriers ("ILECs") and other trading
partners that must trade information and share network capabilities to serve
customers. The US Federal Telecommunications Act of 1996 encourages competition
among providers of local phone services by requiring ILECs to allow new CSPs to
access the ILEC's OSSs and lease portions of their networks. Hundreds of CSPs
are vying to win customers from the ILECs by offering better pricing and
service. With DSET solutions, CSPs can build trading partner networks that
assist "provisioning" or "service-fulfillment" of phone service for new
customers in days rather than weeks. In addition, DSET solutions help CSPs
maintain a higher level of quality of service for their existing customers.

         Historically, the Company focused on the creation of applications that
could be distributed among many processors in order to solve highly complex
problems in the network management arena. These applications are predominantly
sold to network equipment vendors, both domestically and internationally. Until
1999, substantially all the Company's revenues had been derived from application
development tools and applications or services based on Telecommunications
Management Network ("TMN") standards. At the end of 2000, the Company decided to
exit its product lines in application development tools and local service
management systems due to the expenses and the shrinking revenue base associated
with them.

         A major downturn in the telecommunications industry, and specifically
the CLEC market, occurred in the second half of the year 2000. This downturn
reduced DSET's revenues significantly as compared with the corresponding periods
of the previous year beginning in the third quarter of 2000 and continuing to
the most recent quarter-end. This also caused the Company to incur losses for
each of these quarters. The downturn was brought about by the almost sudden
withdrawal of available financing from almost all of the traditional financing
sources (vendors, lenders, private equity/venture capital sources, public equity
markets and large corporate partners) to the Company's current and potential
customers. The CLECs have experienced this decrease in funding due to concerns
over their business models. It has forced CLECs to stop spending on many capital
projects, including establishing trading partner networks, resulting in lower
sales of DSET products and services. Many of DSET's targeted customers have
already purchased billing and order management systems but have decided to delay
their purchases of gateways until the funding climate improves and the order
flow from their customers increases. These purchasing delays not only occurred
at large well-funded CLECs, but also at start-up CLECs. Prior to this downturn,
the new CLECs were successfully and regularly obtaining large capital
commitments allowing them to increase the size and the pace of their
infrastructure spending. This funding crisis also affected our collection
efforts since many customers either declared bankruptcy or concluded that they
did not have sufficient


                                       14





<PAGE>





available cash to repay their obligations to DSET. While we believe that we have
adequately reserved for potential doubtful accounts, no assurance can be made
that no additional customers will be unable to pay their outstanding obligations
or go bankrupt.

         DSET's policy to assess the probability of collection consists of
reviewing public and private sources of financial information for all potential
customers (e.g. financial statements, periodic filings and press releases),
inquiring of management of the potential customer as to how they intend to pay
for their purchase, reviewing available information from credit rating agencies,
reviewing recent announcements regarding completed and proposed financing and
discussing the potential customer's credit worthiness with other suppliers.

         Prior to the third quarter of 2000, the Company's experience with the
necessity for creating allowances for bad debt had been good. The Company's
ongoing credit assessment procedures include maintaining contact with the
customer regarding the status of the receivable, reviewing all overdue
outstanding balances and continuing to review available public and private
information regarding the customer's ability to pay. The sudden and swift market
change beginning in the third quarter of 2000 resulted in certain customers
declaring bankruptcy as some had overextended their available financing, others
to reduce their capital expenditures and others to state their intention not to
pay their outstanding obligations.

         DSET is currently offering license run time pricing with little monies
due up front as a response to this downturn. DSET has also reduced headcount and
expenses in an effort to conserve cash and ultimately return to profitability.
DSET has utilized monies previously invested in marketable securities to finance
the losses brought about by the downturn.

         During fiscal 2000, the Company recorded a pre-tax restructuring charge
of $601,600 for a headcount reduction of 71 employees and other costs associated
with the consolidation of our development centers into two rather than three
facilities. These restructuring actions occurred in the Company's fourth fiscal
quarter and were taken to align the Company's cost structure with the prevailing
market conditions.

         In January 2001, the Company sold its subsidiary, Chengdu DSET Science
and Technology Co., Ltd. In accordance with Statement of Financial Accounting
Standards No. 121, "Accounting for the Impairment of Long-Lived Assets and for
Long-Lived Assets to Be Disposed Of", the Company recorded a pre-tax charge of
$278,500 in the fourth fiscal quarter of 2000 against the remaining investment
in the subsidiary.

         In March 2001, the Company deemed it necessary to have an additional
workforce reduction in the United States and to close its Canadian subsidiary
due to the changing and unpredictable conditions in the marketplace, the
discontinuance of certain product lines and in an effort to conserve cash. The
Company recorded an impairment charge of approximately $2.2 million in the first
quarter of 2001 for the carrying value of certain licenses related to the
Canadian market. Headcount was reduced by 47 employees in the United States and
Canada. Charges relating to severance, lease payments and facility closure were
approximately $1.2


                                       15





<PAGE>




million. The Company may be required to reduce its expenses in the future which
may result in additional charges.

         The Company's return to profitability will depend on the market for OSS
interconnection products and services. The CSPs have experienced a decrease in
funding due, among other factors, to concerns over their business models. This
decrease in funding has forced CSPs to stop spending on many capital projects,
including DSET gateways. Many of the Company's targeted customers have already
purchased billing and order management systems but have decided to delay their
purchases of gateways until the funding climate improves and the order flow from
their customers increases. These purchasing delays not only occurred at large
well-funded CSPs, but also at start-up CSPs. This funding crisis also affected
the Company's collection efforts since many customers experienced financial
difficulties and were unable to pay the Company. While the Company believes that
it has adequately reserved for doubtful accounts, no assurance can be made that
no additional customers will be unable to pay or go bankrupt.

         For the quarters ended March 31, 2001 and 2000, the Company derived
approximately 44.5% and 69.8%, respectively, of its total revenues from license
revenues and approximately 55.5% and 30.2%, respectively, of its total revenues
from service revenues. During the first quarter of 2001, revenues generated from
CSPs were approximately $2.8 million and revenues generated from network
equipment vendors for local number portability ("LNP") solutions, application
development tools and related services were approximately $600,000. During the
first quarter of 2000 revenues generated from CSPs were $7.0 million and
revenues generated from network equipment vendors were approximately $4.6
million.

         DSET's license revenues from CSPs are derived from the sale of
electronic-bonding gateways to CSPs under contracts that provide for license
fees. Prices for licenses of the CSPs' products range from $115,000 to $500,000.
The total price of a license sale to a customer depends on the number of
licensed products and the number of trading partners. License revenues are
derived from the sale of LNP solutions and application development tools to
customers under contracts that generally provide for license fees and run-time
royalty fees. Prices for development licenses of the Company's LNP solutions and
application development tool suites can range from approximately $150,000 to
$400,000, depending on the number of licensed components and development users.
The Company's license agreements for application development tools also
typically provide for run-time royalty fees that are earned at the time of
deployment by equipment vendors to telecommunications carriers of network
devices that have embedded applications built with the Company's software. A
run-time license permits an equipment vendor to incorporate applications
developed with the Company's software tools in such vendor's telecommunications
network devices. License revenues from development licenses are recognized at
the time the product is shipped to the customer. Run-time royalty fees are
recognized as the Company is notified of such deployment. Notification is
typically received from customers pursuant to quarterly reports or via purchase
orders for individual licenses.

         The Company's service revenues are comprised of fees derived from
custom application development products and services, maintenance fees,
installation and training fees and other revenues generated from customer
support services. The Company's application development


                                       16





<PAGE>




services are generally individually negotiated and contracted for on a fixed
price basis. Prices for such projects vary depending upon the size and scope of
the project and estimated time and effort to completion. Revenues from
application development services are generally recognized on a percentage of
completion basis calculated as direct labor costs are incurred in relation to
estimated total costs at completion for each project. The impact of revisions in
percentage of completion estimates is reflected in the period in which the
revisions are made. Maintenance services, for which the Company typically
charges between 15% and 30% annually of the price of the products licensed by
the customer, may be purchased at the customer's option. Maintenance fees are
recognized as service revenue over the term of the maintenance period, which is
typically a 12-month term.

         The Company had one customer accounting for 37% of revenues for the
quarter ended March 31, 2001 and one customer, which accounted for 20% of
revenues for the quarter ended March 31, 2000. The Company had one customer
accounting for 14% of accounts receivable, net at March 31, 2001 and one
customer accounting for 23% of accounts receivable, net at December 31, 2000.
The Company anticipates that its results of operations in any given period will
continue to depend to a significant extent upon sales to a small number of
customers. In addition, the Company anticipates that its results of operations
in any given period will also continue to depend on its customers' cash flow and
ability to obtain external financing. As a result of this customer concentration
and the uncertainty in the Company's financing, the Company's revenues from
quarter to quarter, financial condition and results of operations may be subject
to substantial period-to-period fluctuations.

         The Company's costs of license revenues consist primarily of royalties
paid to third party software companies and the amortization of acquired
technology and capitalized software development costs. The Company generally is
not contractually obligated to make minimum royalty payments. Costs of service
revenues include primarily payroll, related benefit costs, personnel and other
operating expenses. Sales and marketing expenses consist of salaries,
commissions and bonuses paid to sales and marketing personnel, as well as travel
and promotional expenses. Research and product development expenses encompass
primarily software engineering personnel costs, costs of third-party equipment,
costs associated with customer satisfaction and quality and software utilized
for development purposes. Research and product development expenses are charged
to operations as such costs are incurred. The Company's research and development
projects are evaluated for technological feasibility in order to determine
whether they meet capitalization requirements. General and administrative
expenses are comprised of personnel costs and occupancy costs for
administrative, executive and finance personnel.

         During the year ended December 31, 1997, deferred stock compensation of
$876,000 was recorded for options granted. This amount has been amortized to
compensation expense over the vesting period of the options (two to four years).
At March 31, 2001, the remaining unamortized deferred stock compensation balance
was approximately $41,000.

         The Company primarily markets and sells its products and services
through a direct sales force in North America.


                                       17





<PAGE>




         The Company derives a portion of its revenues from international sales,
which constituted approximately 1% and 6% of the Company's total revenues in the
first quarter of 2001 and 2000, respectively. International sales are derived
from Europe (primarily Italy and Germany), and Asia (primarily Korea, China and
Japan). The Company's international sales currently are United States
dollar-denominated. As a result, an increase in the value of the United States
dollar relative to foreign currencies could make the Company's products and
services less competitive in international markets.

Forward-Looking Statements

         Statements contained in this Form 10-Q/A that are not based on
historical fact are "forward-looking statements" within the meaning of Section
21E of the Securities Exchange Act of 1934, as amended. Forward-looking
statements may be identified by the use of forward-looking terminology such as
"may," "will," "should," "expect," "estimate," "anticipate," "continue," or
similar terms, variations of such terms or the negative of those terms. Such
forward-looking statements involve risks and uncertainties, including, but not
limited to: (i) the substantial variability of the Company's quarterly operating
results, (ii) the Company's dependence on the rapidly evolving
telecommunications industry, (iii) rapid technological change in the Company's
industry, (iv) uncertainty in the Company's customers' cash flow and external
financing environment, (v) the limited number of customers for a significant
portion of the Company's revenue, (vi) risks associated with market acceptance
of the Company's new OSS gateways interconnection and LNP products, (vii) risks
associated with intense competition in the industry, including competition for
qualified technical personnel, (viii) the buying patterns of the
telecommunications providers, (ix) the ongoing risk of that telecommunications
providers will not get expected funding to advance their business model and (x)
risks associated with acquisitions of businesses by the Company, including risks
relating to unanticipated liabilities or expenses or lower than expected
revenues of such acquired businesses. The success of the Company depends to a
large degree upon increased demand by Telecom Service Providers for its new OSS
Interconnection products and by network equipment vendors for its LNP products.
As a result of such risks and others expressed from time to time in the
Company's filings with the Securities and Exchange Commission, the Company's
actual results may differ materially from the results discussed in or implied by
the forward-looking statements contained herein.


Results of Operations

Three Months Ended March 31, 2001 Compared to the Three Months Ended March 31,
2000

         Revenues. Total revenues decreased by 70.6% to $3.4 million in the
first quarter of 2001 from $11.6 million in the first quarter of 2000. License
revenues decreased by 81.2% to $1.5 million in the first quarter of 2001 from
$8.1 million in the first quarter of 2000. This decrease was attributable to a
reduction in orders from customers due to financing issues of prospective
customers. Service revenues decreased 45.9% to $1.9 million in the first quarter
of 2001 from $3.5 million in the first quarter of 2000. This decrease was
attributable to less percentage of completion revenue recorded for custom
carrier and network projects offset by a $700,000 increase in carrier gateway
maintenance. Revenues recorded using the percentage of completion


                                       18





<PAGE>




method of contract accounting amounted to $41,000 in the first quarter of 2001
as compared to $2.4 million in the first quarter of 2000.

         Gross profit. The Company's gross profit decreased 89.2% to $923,000 in
the first quarter of 2001 from $8.6 million in the first quarter of 2000. Gross
profit percentage for license revenues decreased to 67.0% in the first quarter
of 2001 from 90.1% in the first quarter of 2000 due to a lower sales volume and
amortization of acquired technology and capitalized software development costs.
Gross profit percentage for service revenues decreased to -5.1% in the first
quarter of 2001 from 36.2% in the first quarter of 2000. The decrease in gross
profit percentages was attributable to lower sales as there are fixed expenses
within cost of goods sold.

         Sales and marketing expenses. Sales and marketing expenses decreased
3.1% to $2.5 million in the first quarter of 2001 from $2.6 million in the first
quarter of 2000. The decrease in sales and marketing expenses was attributable
to a $250,000 decrease in commission expense offset by an increase of $250,000
in personnel and related costs resulting from the increase in the Company's
sales and marketing force and a decrease in travel expense of $100,000.

         Research and product development expenses. Research and product
development expenses increased 14.4% to $3.9 million in the first quarter of
2001 from $3.4 million in the first quarter of 2000. The increase in research
and product development expenses was due to expansion in the number of new
products under development and expenses relating to increase in personnel. In
March 2001 an expense reduction plan was put in place, but the substantial
effect of these actions will not be realized until the second quarter of 2001.

         General and administrative expenses. General and administrative
expenses increased 43.0% to $1.9 million in the first quarter of 2001 from $1.3
million in the first quarter of 2000. The increase in general and administrative
expenses was due to a $200,000 increase in occupancy charges, a $200,000
increase in relocation expenses, a $100,000 increase in professional fees and a
$200,000 increase in salaries all offset by a $100,000 decrease in recruiting
costs. Due to the relocation of personnel to our Plano office, administrative
departments have had to absorb a larger portion of the facilities costs of the
Bridgewater facility.

         Bad debt expense. Bad debt expense increased to approximately $440,000
in the first quarter of 2001 from approximately $99,000 in the first quarter of
2000. The bad debt expenses recognized in the three months ending March 31, 2001
consisted of the following components: recognition of bad debt expense due to
customers that discontinued projects or stated their intention not to pay
($314,000) and the declaration of bankruptcy by a customer ($126,000). Bad debt
expense as a percentage of sales was 12.9% in the three months ending March 31,
2001 as compared to 0.9% in the corresponding period in the previous year. Total
revenues were $3.4 million for the three months ended March 31, 2001 as compared
to $11.6 million for the three months ended March 31, 2000 which drove the
increase in the bad debt expense as a percentage of sales.

         Restructuring and other charges. Restructuring and other chargers in
the first quarter of 2001 were $3.4 million including an impairment charge of
$2.2 million for the carrying value of


                                       19





<PAGE>




certain licenses related to the Canadian market, $400,000 in charges related to
severance related to the March 2001 reduction in force and $800,000 in charges
related to the facility closure in Canada and asset impairments in both Canada
and the United States.

         Amortization of goodwill. Amortization expense decreased to
approximately $100,000 in the first quarter of 2001 as compared to $103,000 in
the first quarter of 2000.

         Interest expense and other income (expense). Interest expense and other
income and expense decreased to $47,000 for the first quarter of 2001 from
$55,000 for the first quarter of 2000 due to lower principal balances.

         Interest income. Interest income increased to approximately $490,000 in
the first quarter of 2001 as compared to approximately $398,000 in the first
quarter of 2000. This increase was due to the recognition of gains and losses on
redemption of bonds and other securities.

         Income taxes. The Company's effective tax rate was approximately 0.3%
and 33.3% for the first quarter of 2001 and 2000, respectively. The 2001 rate
differs substantially from the statutory rate due to a valuation allowance of
approximately $3.7 million against the deferred tax assets. In making this
assessment, the Company considered the unpredictability of customers' funding
and purchasing decisions. In the first quarter of 2000, the tax provision on the
current period reflects an effective tax rate lower than the statutory tax rate
due to state income taxes offset by utilization of research and development and
foreign tax credits.


Liquidity and Capital Resources

         Since its inception in 1989, the Company has financed its operations
primarily through cash generated by operations and cash raised through its March
1998 initial public offering. At March 31, 2001, the Company's cash, cash
equivalents and marketable securities aggregated approximately $26.1 million, of
which cash and cash equivalents aggregated approximately $6.4 million and
marketable securities aggregated approximately $19.7 million. Marketable
securities at March 31, 2001 were comprised of fixed income government
securities and corporate bonds. The Company's working capital was $26.4 million
and $35.3 million at March 31, 2001 and December 31, 2000, respectively.

         Accounts receivable, net, decreased to $4.9 million at March 31, 2001
from $6.2 million at December 31, 2000, primarily as a result of decreased
quarterly sales, and an increase in allowance for doubtful accounts. Included in
accounts receivable at March 31, 2001 was $15.3 million for trade receivables
and $2.6 million for unbilled project revenue as compared to $16.1 million for
trade receivables and $2.9 million for unbilled project revenue at December 31,
2000. The allowance for doubtful accounts was $12.7 million at March 31, 2001 as
compared to $12.3 million at December 31, 2000. Unbilled project revenue is the
excess amount of revenue recognized through percentage of completion that has
not been billed to the customer. Payment terms to customers are generally net
zero to net ninety days.


                                       20





<PAGE>




         The Company bills its foreign customers in U.S. dollars at agreed-upon
contractual terms. Accounts receivable at March 31, 2001 includes approximately
$381,000 from foreign customers.

         The Company's capital expenditures were approximately $604,000 and $1.0
million for the three months ended March 31, 2001 and 2000, respectively.

         In June 1999, the Company entered into a five-year capital lease
agreement at an annual interest rate of 8.21% for equipment, furniture and
fixtures at its new office facilities. Assets recorded under this lease are
included in fixed assets. Annual lease payments approximate $180,000.

         During August 2000, the Company renewed an unsecured revolving credit
facility with a bank pursuant to which the Company may borrow up to a maximum of
$5.0 million. Borrowings under this line of credit bear interest at the bank's
prime rate less 0.25% on aggregate principal amounts outstanding of less than
$1.0 million and at the bank's prime rate for aggregate principal amounts
exceeding $1.0 million. No borrowings under this line were outstanding as of
March 31, 2001. This credit facility contains, among other provisions, covenants
which: (i) mandate the amount of working capital the Company must maintain at
the end of each calendar quarter; and (ii) restrict the Company's ability to pay
cash dividends. The unsecured revolving credit facility expires on August 5,
2004. At March 31, 2001 and December 31, 2000 the "earnings before income taxes,
depreciation and amortization" ("EBITDA") covenant was not met. The Company has
applied for a waiver of this covenant.

         The net proceeds received by the Company upon the consummation of its
initial public offering in March 1998, pending specific application, were
invested in short-term, investment-grade, interest-bearing instruments and have
been used to finance operations.

         The Company believes that its existing available cash and marketable
securities, its revolving credit facility and the cash flow expected to be
generated from operations will be adequate to satisfy its current and planned
operations for at least the next 12 months. There can be no assurance, however,
that the Company will not require additional financing prior to such time to
fund its operations or possible acquisitions.

         European Monetary Union

         On January 1, 1999, eleven of the fifteen member countries of the
European Union set fixed conversion rates between their existing currencies and
the euro. At such time, these participating countries adopted the euro as their
common legal currency. The eleven participating countries now issue sovereign
debt exclusively in euros and will redenominate outstanding sovereign debt. The
legacy currencies will continue to be used as legal tender through January 1,
2002, at which point the legacy currencies will be canceled and euro bills and
coins will be used for cash transactions in the participating countries.


                                       21





<PAGE>




         The Company does not denominate its international revenues in foreign
currencies. The Company currently does not believe that the euro conversion will
have a material impact on the Company's results of operations or financial
condition.

Item 3.  Quantitative and Qualitative Disclosures About Market Risk.

         The Company believes that it is not subject to a material impact to its
financial position or results of operations relating to market risk associated
with foreign currency rates or derivative securities.

         The Company believes the market risk exposure with regard to marketable
securities held in the investment portfolio is limited to changes in quoted
market prices for such securities. Based upon the composition of the Company's
marketable securities at March 31, 2001, the Company does not believe an adverse
change in quoted market prices would be material to its results of operations.


                                       22





<PAGE>




                           PART II. OTHER INFORMATION


Item 2.  Use of Proceeds

         Use of Proceeds from Initial Public Offering

         On March 12, 1998, the Commission declared effective the Company's
Registration Statement (Registration Statement No. 333-43827) as filed with the
Commission in connection with the Company's initial public offering of Common
Stock, which was managed by BT Alex. Brown Incorporated, BancAmerica Robertson
Stephens and SoundView Financial Group, Inc. Pursuant to such Registration
Statement, the Company registered and sold an aggregate of 2,500,000 shares of
its Common Stock, for a gross aggregate offering price of $40.0 million. The
Company incurred underwriting discounts and commissions of approximately $2.8
million. In connection with such offering, the Company incurred total expenses
of approximately $1.1 million. As of March 31, 2001, the remainder of the $36.1
million in net proceeds received by the Company upon consummation of such
offering, pending specific application, were invested in short-term,
investment-grade, interest-bearing instruments and have been used to finance
operations.

         On January 25, 1999, DSET Acquisition Corp., a wholly-owned subsidiary
of the Company consummated the acquisition of certain assets of NPL. The
purchase price consisted of $2.5 million payable in cash to NPL and professional
fees of $158,000. NPL provided specialized software to CSPs.

         On September 30, 1999, the Company purchased Konark and related
technologies for approximately $3.3 million in cash and certain deferred
payments plus professional fees and the related deferred tax liabilities. Konark
provided software, which enabled CSPs to rapidly activate new services for their
customers.

         In June 2000 and July 2000, the Company purchased exclusive worldwide
licenses for various products from Daleen Technologies, Inc. for $2.5 million
payable in cash. A royalty will also be due based on future sales. Subsequently,
in March 2001, due to changing and unpredictable conditions in the marketplace
and in an effort to conserve cash, the Company decided to abandon this product
line and recorded an impairment charge of approximately $2.2 million for the
carrying value of this license.

         For working capital restrictions and limitations on the payment of
dividends, see "Item 2. Management's Discussion and Analysis of Financial
Condition and Results of Operations -- Liquidity and Capital Resources."


                                       23





<PAGE>




Item 5.           Other Information.


Item 6.           Exhibits and Reports on Form 8-K.

       (a)        Exhibits.

                  None.

       (b)        Reports on Form 8-K.

                  No Reports on Form 8-K were filed during the quarter for
                  which this report on Form 10-Q/A is filed.


                                       24





<PAGE>




                                   SIGNATURES

         Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.


<TABLE>
           <S>                                      <C>
                                                    DSET CORPORATION

           DATE: December 11, 2001                  By: /s/ William P. McHale, Jr.
                                                        ------------------------------------------
                                                            William P. McHale, Jr., President
                                                            and Chief Executive Officer
                                                            (Principal Executive Officer)



           DATE: December 11, 2001                  By: /s/ Bruce M. Crowell
                                                        ------------------------------------------
                                                            Bruce M. Crowell
                                                            Vice President and Chief Financial
                                                            Officer
                                                            (Principal Financial and Accounting
                                                            Officer)
</TABLE>


                                       25